DCAP Interview Series – for the last issue of this year, Sebastian Steib, Lead Investment Management at DCAP, shares his views on how the industry has evolved in the past years and why he believes that digital assets will revolutionise the way we invest.

Sebastian, you have an investment career, which spans almost 3 decades. We are eager to learn from you, how it was, how it evolved and how you see the future of investment management.

First of all, I should mention that I did not “plan” an investment career at all or anything like that: it “just happened”. Even my decision to join the asset management industry was not a deliberate one. I joined the financial analysis department of a larger Swiss bank after having graduated in Economics and I found the transition from theory to practice quite easy because our work contained plenty of analysis; something we already did at university.

I found out only later when I joined the options boutique O’Connor & Associates LP in Chicago, that finance was something that truly interested me. Hence, I started to buy many books on finance and securities valuation and dug into that very fascinating and intellectually challenging field, also when I prepared for my AZEK-CEFA exam. It is interesting to explore how to value assets with solid mathematical models and to find out if they are undervalued or overvalued. When investing, you need a fundamental anchor to make a good decision.

To sum up, I always considered myself extremely privileged that I could do during my career so far what I was passionate about. I always enjoyed my work: it was never boring or repetitive and I had the unique opportunity to meet and work with plenty of great, very smart and talented people, both practitioners (e.g. traders) and academics.

Your first analysis was perhaps written on a typewriter. And now you are embarking on the crypto journey. Can you share some insights over this very eventful period in terms of technology and what your experience was as a proficient investment professional?

You are absolutely right. We used typewriters first, something which is unimaginable nowadays. Not the old Remington steel typewriters, but already an electric Olivetti typewriter with carbon tape, so that the printed result looked neat. The problem was that there was no text storage capacity, yet. That came only later with floppy disks added to that device.

In the early 80s, Bill Gates launched the personal computer and Commodore and IBM had to follow suit, launching the Commodore 64 and the IBM XT and later the IBM AT personal computer, respectively, which were quite expensive at the time (about 2 monthly salaries for the IBM models).

So, my peers all bought personal computers and I wrote my master thesis with the help of a personal computer. The printer standards (matrix printers), however, were still low, so the prints did not look very nice.

As the journey went on, what essentially changed the world, also in finance, was the emergence of the internet. We started to use it in the mid-90s and it was of great help, primarily as a very large database to access information, but later also as a very efficient distribution channel for financial products. Nowadays, we cannot imagine a world without the internet anymore.

My first steps into the crypto world came rather late. I must admit that as a non-digital native, i.e. a boomer, I am still learning but I enjoy it. It is extremely interesting how this field evolved and is leading to a great democratization of finance, how cryptocurrencies essentially challenge the central banks, which fear the loss of their seigniorage (privilege to issue bank notes).

When you look at the historic inflation record of central banks, like those of Argentina or Zimbabwe, then one must admit, that the central banks did, on average, a bad job and that it is about time that they are stripped of the privilege of seigniorage.

The democratization of seigniorage is the emergence of cryptocurrencies, not only as a hedge against inflation but also to evade the legal arbitrariness of autocratic regimes. For example, anyone, who had to flee Russia overnight in February/March 2022 was lucky if he/she had some cryptocurrencies stored in a safe wallet.

Can you share some fundamentals and valuations of some big tech companies over time?

A company that I closely followed (and unfortunately did not invest in at an early stage) was Apple Computers. I was just fascinated by Steve Jobs, his visions, and his determination to change the world: amazing (even though he might have had some deficits in his interpersonal skills).

As early as 1984, I saw the first presentation of the Macintosh computer with a mouse attached which completely fascinated me. It was the first mouse on the market and users at that time did not know how to properly handle it: they just pointed with it on the screen and did not know that they had to move it on a pad. Later, in 1992, when I worked for O’Connors in Chicago, we all used NeXT Computers, a great UNIX-based machine developed in 1988 by Steve Jobs and his new team at NeXT, after he had been sacked from Apple by the then CEO, John Sculley.

It was a very powerful machine and the O’Connors options trading company could not buy enough of them to supply its rapidly growing staff, so we had to buy second-hand machines for higher (!) prices than the original sales price in the secondary market: crazy.

The rest of the Apple story is common knowledge now. After having gone almost bust in the early 90s, Steve Jobs re-joined Apple in 1996 as the new CEO, after Apple had bought his company, NeXT Computers.

Steve Jobs had an incredible talent for understanding what consumers want and finding easy solutions to complex problems. Also, he had a passion for detail and design. Apple revolutionised the entire music and entertainment industry and started to build great products again, which became iconic and made Apple Inc. one of the most valuable companies in the world, valued at nearly 3 trillion dollars.

Given the dynamic nature of the Web3 landscape, how do you stay updated on emerging trends and technologies and how does your investment strategy adapt to these changes?

Here I rely on my colleagues for input. They are all between 25 and 30 years young and, age-wise, could be my sons. The younger generation has a completely different and much more natural access to technology and innovation. I must admit that without envy. Mixing young talent and their enthusiasm with the experience of investors of my age will create a great winning team.

Operational security is a crucial aspect in the Web3 space. How do you evaluate and address security concerns when managing a portfolio that includes blockchain-based assets? In particular for investors, who are still becoming familiar with this new asset class?

Security is extremely important. It already starts with discipline and a certain security consciousness with your own laptop and password management. It is important not to expose oneself to potential viruses or cyber-attacks. It continues with office security on your internal network, servers, clouds, and your operational set-ups to trade securities and cryptocurrencies. We work with the best counterparties in the industry and continuously monitor them.

How do you like to spend your time away from the financial industry and what is your secret to staying fit and energetic?

I like to spend my free time with my family, i.e. with my wife and our two sons who are still quite young. I do enjoy playing with them or going to the forest and making a fire or roasting some sausages with them. Also, going sledging or skiing in winter with my sons is just great. When I find the time, I like to take tours with my mountain or street bike to keep fit.

I think the most important thing is to enjoy life, to stay always curious, and be ready to learn new things – at any age.